S&P Simple Swing Objective
In these uncertain times, I think there are just three things to keep in mind.
- The stock market as represented by the S&P was in a manipulated state between January 2018 and February 2020. What does that mean, well all the kids out there, analysts born after 1987, have their heads on backwards. Prices during that 2 year period have no value going forward other than for simple swing objectives.
- Second, the bear market bounce went almost exactly to a forecast maximum rally on the S&P, to 2860.
- A simple 9 month swing objective in an uncharted world provides a number to keep in the back of your mind. First the calculation, 2860 bounce high minus bounce low 2190 = 670 S&P points. To get a simple swing down, multiply 670 times 2.0 which = 1340. Then subtract swing points from bounce high 2860. So 2860 less 1340 = 1520.
See what I call the Mnuchin Panic Circle in Red in the chart here.
And Keep in Mind...
Prior to the Trump Tax cuts directed primarily to corporations in late 2017, investors desiring a stable market only had to keep an eye out for the FED, the don’t fight the FED line. After late 2017 the un-spoken line was don’t fight the FED and the Federal Administration. As of April 9, 2020 that line has been amped up by a factor of 100. This is a government that will do anything to manipulate the markets and try to keep them overvalued. Adding to this syndrome, are predominance of the pension fund managers whose main concern is keeping their fee trail intact, there is no thought about value, they can always blame the market on the crashes.
So managing the next 7 months will test every bone in your body.
And then there is COVID 19
My wife and I are over 70 and she is a retired physician. Until there is mandatory bi-weekly testing of all employees doing business with the public, especially food and health service, we don’ plan to end stay in place until there is a vaccine. That means no contact with kids and grandkids also maybe for 18 months.